On the Allocative Efficiency of Competitive Prices in Economies with Incomplete Markets
Issue Date
2003-09Author
Sabarwal, Tarun
Type
Working Paper
Published Version
http://econpapers.repec.org/paper/wpawuwpge/0410006.htmMetadata
Show full item recordAbstract
A new measure of constrained efficiency for application in economies with incomplete markets is presented. This measure --- termed Allais- Malinvaud efficiency --- can be viewed as adjusting for market incompleteness not fully captured in previous work. It is shown that equilibrium allocations in Radner-GEI economies are always Allais- Malinvaud efficient. In particular, a re-distribution of assets in equilibrium cannot induce a relative price change that leads to an Allais-Malinvaud improvement. Moreover, this result extends to Radner- GEI economies in which consumer liability is limited by bankruptcy.
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Citation
Sabarwal, Tarun, (2004), On the Allocative Efficiency of Competitive Prices in Economies with Incomplete Markets, GE, Growth, Math methods, EconWPA, http://EconPapers.repec.org/RePEc:wpa:wuwpge:0410006.
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